United States Restricts Exports of Critical Personal Protective Equipment

The Federal Emergency Management Agency (FEMA) on April 8, 2020, released an advance copy of a temporary rule banning exportation of five types of Personal Protective Equipment (PPE) from the United States without its explicit approval during the coronavirus (COVID-19) pandemic. FEMA acted under the Defense Production Act of 1950 and in response to President Donald Trump's April 3 Memorandum, which directed the Secretary of Homeland Security, through FEMA and in consultation with the Secretary of Health and Human Services, to allocate to domestic use, as appropriate, scarce or threatened medical material.¹

The rule will become effective upon publication in the Federal Register, anticipated to be April 10, 2020. This temporary rule will last for 120 days.

The covered PPE includes:

• N95 Filtering Facepiece Respirators
• Other Filtering Facepiece Respirators (e.g., those designated as N99, N100, R95, R99, R100, or P95, P99, P100)
• Elastomeric, air-purifying respirators and appropriate particulate filters/cartridges
• PPE surgical masks
• PPE gloves or surgical gloves

CBP will be required, and in fact has already started, to detain any shipment of such PPE in order to enable FEMA to determine whether to return the PPE to domestic use, issue a rated order² for, or allow the export of part or all of the shipment to proceed. FEMA must make such determination within a "reasonable time" of being notified of an intended shipment based on multiple factors – which necessitate intragovernmental consultations – including:

• the need to ensure that scarce or threatened items are appropriately allocated for domestic use
• minimization of disruption to the supply chain, both domestically and abroad
• the circumstances surrounding the distribution of the materials and potential hoarding or price-gouging concerns
• the quantity and quality of the materials
• humanitarian considerations, and
• international relations and diplomatic considerations

Although FEMA did not specify how many hours or days consist of a "reasonable time," the government has pledged to minimize disruptions to the supply chain and make determinations quickly.

Exemption From the Ban

There is one exemption available for shipments of covered PPE made by or on behalf of U.S. manufacturers with continuous export agreements with customers in other countries since at least Jan. 1, 2020, provided that at least 80 percent of the manufacturer's domestic production of covered materials, on a per item basis, was distributed in the U.S. in the preceding 12 months.

If FEMA determines that a shipment falls within this exemption, such covered PPE may be approved by FEMA to be exported without further review. However, FEMA may waive this exemption and fully review the above shipments if the government determines that doing so is necessary or appropriate to promote the national defense.

FEMA's review is triggered once a shipment of the covered PPE is detained by the CBP. While the rule does not provide a process for seeking advanced government approval, manufacturers could contact FEMA with specific information regarding their status under this exemption. FEMA has also hinted that it may develop additional guidance regarding which exports are covered by this exemption.

Penalties

Failure to comply fully with the rule is a crime punishable by fine of not more than $10,000 or imprisonment for not more than one year, or both. Moreover, those who fraudulently and knowingly act against the rule could face up to 10 years' imprisonment, a fine, or both. FEMA may also seek an injunction or other order when a person has engaged or is about to engage in an act that constitutes a violation of the rule.

Conclusion and Considerations

Manufacturers, brokers, distributors, exporters and shippers of the covered PPE should pay heightened attention to this new rule and:

• carefully examine the products supplied to determine whether they fall into the scope of the covered PPE
• review the supply agreements with overseas buyers and the manufacturer's previous domestic sales data to determine whether the exemption applies
• ensure that information related to the PPE is accurately and fully provided on all the export documents, and
• consider packaging covered PPE separately from other PPE or medical equipment so as to prevent the noncovered merchandise from being detained for review

Holland & Knight will continue to monitor any further guidance that FEMA may issue regarding additional PPE to be covered by the rule and additional exports to be covered by the exemptions. If you have any questions about applications of the rule, please feel free to reach out to the authors.

(For additional information on PPEs, see Holland & Knight's previous alert, "PPE Shortages: FDA and Chinese Government Issue New Policies for Masks, Gowns and Gloves," April 6, 2020.)

Notes

¹ See Presidential Memoranda, Memorandum on Allocating Certain Scarce or Threatened Health and Medical Resources to Domestic Use, April 3, 2020.

² Issuing a rated order means placing a contract or order to promote the national defense, pursuant to Section 101(a) of the Defense Production Act.

DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact your responsible Holland & Knight lawyer or the authors of this alert for timely advice.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.